<PAGE>
 
                                                               Exhibit 10(KK)(1)


                                   AGREEMENT

     AGREEMENT (this "Agreement") dated as of March 8, 1999, by and between
Michael Gaffney, a resident of the State of Virginia ("Gaffney"), and ICF Kaiser
International, Inc. a Delaware corporation (the "Company").  As used in this
Agreement, unless the context indicates otherwise, the term "the Company" shall
be deemed to refer to ICF Kaiser International, Inc. and each and every one of
its affiliated entities.

                                   WITNESSETH

     WHEREAS, Gaffney presently serves as Executive Vice President of the
Company; and

     WHEREAS, Gaffney and the Company wish consensually to sever the employment
relationship between Gaffney and the Company.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
and promises hereinafter provided and of the actions taken pursuant thereto, the
parties agree as follows:

     1.   Effective Date.  This Agreement shall be executed and become effective
          --------------                                                        
March 17, 1999, (the Effective Date").

     2.   Resignation and Termination of Existing Employment Relationship.  As
          ---------------------------------------------------------------     
of the Effective Date, Gaffney shall be deemed to have resigned from all
corporate offices of the Company, and from all offices and directorships of the
Company's subsidiaries, joint ventures, and affiliated companies, organizations
and entities including, without limitation, plan committees for employee benefit
plans trusts.  During the period from the Effective Date until the close of
business fifteen days after the Effective Date, Gaffney shall assist the Company
as requested by the Company's Chief Executive Officer, Chief Financial Officer,
Group Presidents, or any member of the Board of Directors.  Gaffeny's full-time
employment by the Company shall be deemed to have terminated as of the close of
business 

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on March 17, 1999. Thereafter, and if requested by the Company, Gaffney shall
serve as a variable part-time employee at a rate of $121.19 per hour.

     3.   Records.  As soon as practicable after the Effective Date, the Company
          -------                                                               
shall take such steps as may be necessary to reflect in the corporate records of
the Company, its subsidiaries, joint ventures, and affiliated companies,
organizations and entities that Gaffney has resigned as an officer of the
Company and as an officer and director of the Company's subsidiaries, joint
ventures, and affiliated companies, organizations and entities.

     4.   Payment: The following amounts, less required Federal and state
          -------                                                        
withholding and other deductions and without interest, shall be paid to Gaffney
by wire transfer as directed by Gaffney.

          (a) $150,000 on or before April 4, 1999,
          (b) $50,000 on or before May 4, 1999, and
          (c) $50,000 on or before June 4, 1999.

     5.   Health Benefits.  Gaffney and his dependents shall continue to be
          ---------------                                                  
covered under the Company's provided health insurance April 30, 1999.  Gaffney
may elect to continue his family health benefits provided through the Company to
the extent permitted by Federal COBRA laws in effect as of the date of this
Agreement.  For purposes of COBRA compliance, the date on which Gaffney's health
benefits terminate shall be April 30, 1999.  Except as specifically provided in
this Section 5, all health benefits shall terminate on April 30, 1999.

     6.   Indemnification and Notice Concerning Nonrenewal of Directors,
          --------------------------------------------------------------
Officers and Fiduciaries Insurance Coverage:
------------------------------------------- 

          (a) The Company acknowledges that its Certificate of Incorporation and
By-Laws and the charters and by-laws of certain of its direct and indirect
subsidiaries and employee 

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benefit plans and related trusts include provisions designed to provide to
former officers, directors and fiduciaries indemnification in respect of
threatened and commenced actions, suits and proceedings in which an individual
is a party or is threatened to be made a party by reason of the fact that he is
or was an officer, director or fiduciary of the Company or such subsidiaries or
trusts. The Company shall, and shall cause such subsidiaries and trusts to
continue to provide indemnification to Gaffney under such provisions to the
maximum extent permitted by applicable law.

          (b) So long as the Company maintains directors and officers liability
insurance coverage, or liability insurance for the fiduciaries of its employee
benefits plans and related trusts, Gaffney shall be covered by such insurance,
with respect to his tenure with the Company, on the same terms as other existing
and former officers, directors and fiduciaries.  If, for any reason, the Company
shall not continue to have such insurance coverage in effect on terms
substantially comparable to those presently in effect, the Company shall
purchase substantially comparable insurance coverage for acts arising before the
termination of the previously existing insurance (also knows as "tail" or "run-
off" insurance).

     7.   Employment Reference. Nothing in this Agreement shall prevent either
          --------------------                                                
party from stating the fact that Gaffney was employed by the Company, the
address of his work location, the dates of his employment, his job titles and
job duties, his rate of pay, or that he resigned from his position as an officer
of the Company on or about March 17, 1999.  The Company may respond to
employment inquiries in accordance with the Company Kaiser Employee Handbook.

     8.   Proprietary Information and Business and Personal Property.
          ---------------------------------------------------------- 

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          (a) Gaffney will not directly or indirectly disclose any confidential
records, information, documents, data formulae, specifications or other trade
secrets owned by the Company to any person, or use any such information, except
(i) as appropriate in connection with the activities contemplated by Section 2
or (ii) pursuant to court order or as a result of a valid order, subpoena or
discovery request (and in the case of such disclosure Gaffney will provide the
Company with written notice of the same sufficiently in advance of the required
disclosure date to allow the Company to lodge appropriate objections to such
disclosure).  The immediately preceding sentence shall not apply to information:
(x) disclosure of which is required by law or by process lawfully issued; (y)
which has been disclosed to Gaffney or to a third party by a person not under a
duty of confidentiality with respect to that information; or (z) which later
enters the public domain through no fault or breach of duty by Gaffney.

          (b) Gaffney shall have no ownership interest in any records, files,
information, documents, or the like that belong to the Company which Gaffney has
used, prepared or come into contact with during his employment by the Company,
and, except as appropriate in connection with the activities contemplated by
Section 2, Gaffney shall not remove written copies thereof from the premises of
the Company or any of its affiliates without the Company's written consent.
Within five (5) business days after the Effective Date, Gaffney shall have
returned to the Company all of the Company property Gaffney has in his
possession.  Nothing in this Agreement shall limit Gaffney's right to remove
personal effects from his office within five business days after the Effective
Date.

          (c) Until May 31, 1999 Gaffney shall remain on the Company-sponsored
cellular telephone program provided that Gaffney be responsible for the cost of
                           --------                                            
cellular telephone service as of the Effective Date.  Until May 31, 1999 or
until Gaffney obtains new 

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employment, whichever occurs first, the Company will allow Gaffney to have
access to his voice mailbox on the Company telephone system and to his the
Company e-mail address.

     9.   No Disparaging Statements.  Except as required by applicable law or
          -------------------------                                          
legal process; each of the Company and Gaffney covenant and agree that following
the Effective Ate neither of them nor their of its officers, directors,
affiliates, agents and/or employees shall make disparaging statements concerning
the others (for this purpose, a disparaging statement shall refer to a statement
or statements that, individually or in the aggregate, have a materially
detrimental effect on the business affairs of the Company or Gaffney, as the
case may be).

     10.  Confidentiality of Agreement.  Except as required by applicable law or
          ----------------------------                                          
legal process or as necessary to fulfill the terms of this Agreement or the
General Releases incorporated herein, or in connection with a party's family,
business, or tax affairs (in which case disclosure shall be on a confidential
basis to the extent practicable), the parties shall not disclose the terms or
provisions of this Agreement or such General Releases, or the fact of their
existence, to any person or entity.

     11.  No Admission.  Nothing contained in this Agreement or the General
          ------------                                                     
Releases incorporated herein shall be considered an admission by either party of
any wrongdoing under any Federal, state or local statute, public policy, tort
law, contract law, common law or otherwise.

     12.  No Third Party Claims.  Each party represents and warrants that no
          ---------------------                                             
other person or entity has, or to the best knowledge of such party claims, any
interest in any potential claims, demands causes of action, obligations, damages
or suits released pursuant to this Agreement; that it or he is the owner of all
other claims, demands, causes of action, obligations, damages or suits so
released; that it or he has full and complete authority to execute this
Agreement; and that it or 

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he has not sold, assigned, transferred, conveyed or otherwise disposed of any
claim, demand, cause of action, obligation or liability subject to this
Agreement and the General Releases contemplated hereby.

     12.  Full Releases.  Each party agrees and acknowledges that the
          -------------                                              
consideration received by it or him for this Agreement and the General Release
provided below, and for the execution hereof and thereof, shall constitute full
payment, satisfaction, discharge, compromise and release of and from all matters
for which the other party has mutually released it or him herein and in such
General Releases.

     13.  No Third Party Beneficiaries.  Except as expressly stated herein, the
          ----------------------------                                         
parties do not intend to make any person or entity who is not a party to this
Agreement a beneficiary hereof, and this Agreement should not be construed as
being made for the benefit of any person or entity not expressly provided for
herein.

     14.  Non-Competition.
          --------------- 

          (a) Gaffney agrees that for a six (6) month period commencing as of
the Effective Date, Gaffney will not, except as otherwise provided herein,
engage or participate, directly or indirectly, as principal, agent, employee,
employer, consultant, stockholder, partner or in any other individual capacity
whatsoever, in the planning, conduct, or management of, or own any stock or any
other equity investment in or debt of, any business which is competitive with
any business conducted by the Company.

          For the purpose of this Agreement, a business shall be considered to
be competitive with the business of the Company only if such business is engaged
in providing engineering and construction services (i) similar to (x) any
service currently provided by the Company during the Non-Competition Period; or
(y) any future service of the Company as to 

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<PAGE>
 
which Gaffney materially and substantially participated in the design or
enhancement, and (ii) to customers and clients of the type served by the Company
during the Non-Competition Period.

          (b) Solicitation of Employees.  During the Non-Competition Period,
              -------------------------                                     
Gaffney will not (for his own benefit or for the benefit of any person or entity
other than the Company) solicit, or assist any person or entity other than the
Company to solicit, any officer, director, executive or employee of the Company
to leave his or her employment.

          (c) Reasonableness.  Gaffney acknowledges that (i) the markets served
              --------------                                                   
by the Company are national and international and are not dependent on the
geographic location of executive personnel or the businesses by which they are
employed, (ii) the length of the Non-Competition Period is linked to the term of
the severance benefit provided for above; and (iii) the above covenants are
manifestly reasonable on their face, and the parties expressly agree that such
restrictions have been designed to be reasonable on their face, and the parties
agree that such restrictions have been designed to be reasonable and no greater
than is required for the protection of the Company.

     16.  Advice of Counsel.  The parties acknowledge that they have been
          -----------------                                              
advised, or have knowingly waived such advice, by competent legal counsel in
connection with the execution of this Agreement, that they have read each and
every paragraph of this Agreement and that they understand their respective
rights and obligations.  Gaffney declares that he has completely read this
Agreement, fully understands its terms and contents, and freely, voluntarily and
without coercion enters into this Agreement.

     17.  Entire Agreement.  This Agreement constitutes the entire Agreement of
          ----------------                                                     
the parties with respect to the subject matter hereof, and all prior
negotiations and representations are merged herein or replace hereby.

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<PAGE>
 
     18.  Severability.  If any provision of this Agreement is held illegal,
          ------------                                                      
invalid or unenforceable, such illegality, invalidity, or unenforceability shall
not affect any other provision hereof.  Any such provision and the remainder of
this Agreement shall, in such circumstances, be deemed modified to the extent
necessary to render enforceable the remaining provisions hereof.

     19.  Governing Law.  This Agreement shall be construed and enforced in
          -------------                                                    
accordance with the law of the Commonwealth of Virginia.

     20.  Releases and Effectiveness.  This Agreement and General Releases in
          --------------------------                                         
the forms attached hereto as Exhibits A and B, which are incorporated herein by
reference, have been executed by or on behalf of Gaffney and the Company on the
dates shown opposite their respective signatures below, and this Agreement and
such General Releases are effective as of the Effective Date.

     21.  Disputes.  In the event that nay dispute arises between the parties
          --------                                                           
hereto pertaining to the subject matter this Agreement and the parties are
unable to resolve such dispute within a reasonable time through negotiations,
the parties shall attempt to resolve such dispute pursuant to a mutually agreed
upon alternate dispute resolution mechanism.  Such resolution of the dispute
shall be initiated by written notice given by one party to the other.  If within
10 days after submission of such notice the parties have not agreed upon an
alternate dispute resolution mechanism, the dispute shall be submitted to
arbitration in Fairfax County, Virginia.  In the event the parties are unable to
agree on an alternate dispute resolution mechanism and the dispute is to be
resolved pursuant to arbitration, each party shall appoint an arbitrator within
20 days after the original notice of the dispute, the two arbitrators so chosen
shall promptly appoint a third arbitrator.  If either party fails to name an
arbitrator as aforesaid, such arbitrator shall be designated by the American
Arbitration Association.  If any arbitrator 

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<PAGE>
 
becomes disabled, resigns or is otherwise unable to discharge the arbitrator's
duties, the arbitrator's successor shall be appointed in the same manner as such
arbitrator was appointed. The parties shall not be permitted to conduct
discovery in connection with the arbitration, and, subject to only to the
availability of the arbitrators, the arbitration hearing shall be held within 30
days after appointment of the third arbitrator. Except as aforesaid, the
arbitration shall be conducted under the applicable rules of the American
Arbitration Association. Any determination of the arbitrators shall be binding
and conclusive upon the parties hereto. Application may be made by either party
to any court having jurisdiction thereof for judicial confirmation of any
determination by the arbitrators and/or for an order of enforcement of any such
decision.

     22.  Counterparts.  This Agreement may be executed in counterparts, all of
          ------------                                                         
which shall be considered one and the same agreement, and shall become effective
on the Effective Date.

     IN WITNESS WHEREOF, Gaffney and the Company have executed this Agreement.

ICF KAISER INTERNATIONAL, INC.                     MICHAEL GAFFNEY

By: /s/ R A Levy                                   /s/ Michael Gaffney        
   ----------------------------------              ------------------------
   Its Duly Authorized Representative              Michael Gaffney

Dated: March 8, 1999                               Dated: March 8, 1999
       --------                                           -------      



EXHIBIT A
---------

                              GENERAL RELEASE
                              ---------------

     The ICF Kaiser International, Inc. ("the Company"), on behalf of the
Company and all of its current, former or future affiliated entities,
subsidiaries, departments, officers, directors, employees, 

                                       9
<PAGE>
 
representatives, agents, attorneys, successors and assigns, in consideration of
the terms of the Agreement dated March 8, 1999 between Michael Gaffney
                                 -------
("Gaffney") and the Company (the "Agreement"), and the execution of the General
Release ("Release") by Gaffney, hereby releases and forever discharges Gaffney
and his heirs, successors, agents, executors, administrators, attorneys and
assigns, from any and all claims and causes of action (whether known or unknown)
which the Company has against him in law or equity, under Federal, state,
District of Columbia or other local law, and any claims relating to or arising
under any employment contract, any employment statue or regulation, including
but not limited to actions for fraud and breach of contract; provided, however,
                                                             --------
that the Company does not hereby release Gaffney from his obligation under the
Agreement.

     The Company will not sue or otherwise institute or cause to be instituted
or in any way voluntarily participate in the prosecution of any complaints or
charges against any persons or entities released herein in any federal, state,
District of Columbia or other court, administrative agency or other forum
concerning any claims released herein.

     Except as required by law or as necessary to fulfill the terms of the
Agreement or this Release, or as necessary in connection with the Company
business or tax affairs (in which case disclosure shall be on a confidential
basis to the extent practicable), the Company agrees not to disclose the terms
or provisions of this Release, or the fact of its existence, to any person or
entity.

     The Company understands and agrees that nothing contained in this Release
is to be considered an admission by Gaffney of any wrongdoing under any federal,
state or local statute, public policy, tort law, contract law, or common law.

     The Company acknowledges that this Release can only be altered, revoked or
rescinded with the express written permission of Gaffney.

     This Release is executed in connection with, and is subject to the terms
of, the Agreement.

                                    ICF KAISER International, Inc.

                                    
Date: March 9, 1999                 By: /s/ R A Levy
      -------                           ------------------------

Subscribed and sworn to before me this 9th day of March 1999.
                                       ---        -----      

                                 /s/ Sandra D. Little
                              ____________________________
                                         Notary

My Commission expires: November 30, 2000
                       -------------------------

                                       10
<PAGE>
 
EXHIBIT B
---------


                                GENERAL RELEASE
                                ---------------

     I, Michael Gaffney, on behalf of myself and my heirs, successors, agents,
executors, administrators, attorneys and assigns, in consideration of the terms
of the Agreement dated March 8, 1999, between ICF Kaiser International, Inc.
                       -------                                              
("the Company"), and myself (the "Agreement"), and the execution of the General
Release ("Release") by the Company, hereby affiliated entities, subsidiaries,
departments, officers, directors, employees, representatives, agents, attorneys,
successors and assigns, from any and all claims and causes of action (whether
known or unknown) which I have against them in law or equity, under Federal,
state, District of Columbia or other local law, and any claims relating to or
arising under any employment contract, any employment statute or regulation, or
any employment discrimination law, including but not limited to Title VII of the
Civil Rights Act of 1964, as amended; the Age Discrimination in Employment Act
of 1967, as amended; the Employment Retirement Income Security Act of 1974; any
other federal, state, or local civil rights, pension or labor law; contract law;
tort law; or infliction of emotional distress, provided, however, that I do not
                                               ---------                       
hereby release the Company from its obligations under the Agreement.

     I further agree not to sue or otherwise institute or cause to be instituted
or in any way voluntarily participate in the prosecution of any complaints or
charges against any persons or entities released herein in any federal, state,
District of Columbia or other court, administrative agency or other forum
concerning any claims released herein.

     Except as required by law or as necessary to fulfill the terms of the
Agreement or this Release, or as necessary in connection with personal business
or tax affairs (in which case disclosure shall be on a confidential basis to the
extent practicable), I agree not to disclose the terms or provisions of this
Release, or the fact of its existence, to any person or entity.

     I understand and agree that nothing contained in this Release is to be
considered an admission by the Company of any wrongdoing under any federal,
state or local statute, public policy, tort law, contract law, or common law.

     I acknowledge that I have been advised in writing to consult with an
attorney prior to executing this Release.  I further acknowledge that I have
been given a period of at least twenty-one (21) days within which to consider
and execute this Release, unless I voluntarily choose to execute this Release
before the end of the twenty-one (21) day period.  Once executed, I understand
that I have seven (7) days following the execution of this Release to revoke it,
and that this Release is not effective or enforceable until after this seven-day
period.

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<PAGE>
 
     I acknowledge that I have read this Release, that I understand it, and that
I am executing it freely and voluntarily.  I further understand that once this
Release becomes effective (after the seven day revocation period), it can only
be altered, revoked or rescinded with the express written permission of the
Company.

     This Release is executed in connection with, and is subject to terms of,
the Agreement.


Date: March 9, 1999            /s/ Michael Gaffney
      -------                 ---------------------------
                              Michael Gaffney

Subscribed and sworn to before me this 8th day of March 1999.
                                       ---        -----      

                                 /s/ Anupo Susi
                              ----------------------------
                                         Notary

My Commission expires:    30 June 2002
                       --------------------


                    ELECTION TO EXECUTE PRIOR TO EXPIRATION
                    -OF TWENTY-ONE DAY CONSIDERATION PERIOD-
                    ----------------------------------------

     I, Michael Gaffney, understand that I have at least twenty-one (21) days
within which to consider and execute the above General Release. However, after
consulting counsel, I have freely and voluntarily elected to execute the General
Release before the twenty-one (21) day period has expired.


                                       /s/ Michael Gaffney
                                    -------------------------------
                                         Michael Gaffney

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